Many home buyers are unclear about the difference between mortgagor vs mortgagee. It’s easy to get confused because some of the terms in mortgage agreements are used interchangeably. For instance, the term mortgagor can also be referenced as grantor or consignor.
The distinction concerning mortgagor vs mortgagee is the first makes reference to the individual borrowing money and the second references the entity or person providing the funding.
Another way to remember the difference is using word association tricks. For instance, words used to describe the borrower – mortgagor, grantor, consignor – include the letter ‘o’. Words used to identify the lender – mortgagee, grantee, and consignee – include the letter ‘e’.
Mortgage notes are secured with a promissory note which is a written promise to pay back borrowed funds. Real estate IOUs are legal documents, so mortgagors should read the fine print before attaching their signature.
Promissory notes supply all parties involved with details of the transaction. The document should include the loan principal, rate of interest, dates and amounts of payment installments, prepayment penalty amount, default clause, and date of maturation.
Loan principal pertains to the cost of the house. Lenders charge interest against the principal amount. The rate of interest is based upon various factors including the type of loan and mortgagors’ FICO scores. Borrowers that possess excellent ratings obtain lower interest rates than those with good or average scores.
The majority of lenders assess prepayment penalties in the event borrowers pay off their loan early. Mortgagors need to review the Truth in Lending (TIL) statement which is provided with loan contracts. Additionally, people who apply for a loan are given a Good Faith Estimate which includes the amount of the penalty.
There are good and bad points to getting into mortgage loans which contain a prepayment clause. The upside is these kinds of loans carry a low interest rate. The downside is mortgagors could generate losses when they sell their house or pay back the loan too soon.
The greatest error buyers can make is neglecting to comparison shop lenders. Looking around for the best deal can help buyers obtain lower interest rates and decreased settlement costs. Shaving a quarter percent off interest rates can add up to thousands in savings over the duration of the loan.
Few people would argue that buying a house is a daunting process. However, learning how the process works will improve confidence and enable buyers to make informed decisions.
Several sources provide information about homeownership. A few of the more trustworthy include the Department of Housing and Urban Development, Fannie Mae Homepath, and Freddie Mac Homesteps. Additionally, the FDIC offers a complimentary home buying guide filled with valuable information.
For must of us, buying real estate is the most significant purchase we’ll ever get involved with. For this reason, it is crucial to learn everything possible to ensure a smooth home buying experience. Otherwise, uninformed decisions could result in foreclosure that wreaks havoc on credit ratings.